(Source: PRNewswire)
SANTA ANA, Calif., May 28 /PRNewswire-FirstCall/ -- Grubb & Ellis Company (NYSE: GBE), a leading real estate services and investment firm, today reported revenue of $118.3 million for the first quarter of 2009, compared with first quarter 2008 revenue of $150.4 million. The net loss attributable to the company was $41.5 million, or $0.65 per share, for the first quarter of 2009, compared with a net loss attributable to the company of $6.3 million, or $0.10 per share, in the same period a year ago.
2009 Highlights
-- Amended the company's senior secured credit facility.
-- Recruiting momentum continues, with 18 senior-level brokers joining the
company in the first quarter, raising to nearly 60 the number of top
brokerage sales professionals who have joined in the past nine months.
-- Company ranks as No. 1 public non-traded sponsor REIT based on equity
investment sales for the months of February, March and April, with Grubb
& Ellis Healthcare REIT surpassing the $1 billion mark in equity
raised in April.
-- Awarded 26 new property and facilities management assignments during
first quarter totaling 16 million square feet of property.
-- New cost reduction initiatives result in $5 million annualized savings.
Cumulative 2008 and 2009 restructuring and cost reduction actions
through March 31, 2009, total $25 million in estimated annualized
savings.
Adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) for the first quarter of 2009 was negative $16.5 million, compared with positive adjusted EBITDA of $7.4 million in the same period a year ago. The 2009 first-quarter adjusted EBITDA results excluded the following charges:
-- $4.7 million related to the company's investment management
programs;
-- $5.2 million in real estate-related impairments;
-- $3.6 million loss from discontinued operations, and__
-- $4.9 million of stock-based compensation and amortization of signing
bonuses.
The adjusted EBITDA charges are detailed in the Reconciliation of Net Loss to Adjusted EBITDA in the tables following this release.
"Our results reflect the challenging operating environment as well as the seasonal nature of the commercial real estate industry," said Gary H. Hunt, interim chief executive officer. "We believe that by providing our clients with timely, innovative solutions to the real estate issues they are facing in today's environment we will be able to deliver long-term value to our stockholders so we remain squarely focused on recruiting top talent and providing unmatched client service."
He added, "At the same time, we recognize that financial flexibility is paramount to navigating today's environment, and we continue to be vigilant when it comes to cutting costs and managing our balance sheet."
Credit Amendment
On May 26, the company announced that it had renegotiated its senior secured credit facility. The credit agreement amendment, which was effective May 18, 2009, modifies the amount, terms and length of the facility. Under the new structure, the $67.3 million maximum aggregate credit facility includes a $29.3 million revolving line of credit and a $38 million term loan.
"The amendment reflects the realities of today's credit markets. At the same time, it is an important step in ensuring our future success and demonstrates a continued commitment by the company's lenders in Grubb & Ellis, our growth strategy and our ability to navigate through the difficult environment," said Richard W. Pehlke, executive vice president and chief financial officer.
OPERATING SEGMENTS
Management Services
Management Services revenue includes asset and property management fees as well as reimbursed salaries, wages and benefits from the company's captive management and third party property management and facilities outsourcing services, along with business services fees. Management Services revenue was $65.5 million for the first quarter of 2009, compared with $61.8 million in the same period a year ago. During the first quarter, Grubb & Ellis won 26 new management assignments, including the management of Red Mountain Retail Group's 4.8-million-square-foot retail portfolio and Tesoro Corporation's 600,000-square-foot new headquarters location in Houston.
At March 31, 2009, the company managed approximately 241.2 million square feet of commercial real estate and multi-housing property, including 47.0 million square feet of Grubb & Ellis Realty Investors' captive property portfolio.
Transaction Services
Transaction Services revenue for the first quarter of 2009, including brokerage commission, valuation and consulting revenue, was $33.5 million, compared with $59.1 million in the same period a year ago. Due to the seasonality of the brokerage business, the first quarter is typically the weakest for the industry with revenue accelerating throughout the year. The company's Transaction Services business was also negatively impacted by the current economic environment, which has reduced overall commercial real estate transaction velocity. On a year-over-year basis, the company's leasing revenue decreased by 18 percent, while investment sales revenue declined by 72 percent. This compares with 43 percent and 80 percent year-over-year declines in leasing and investment sales activity, respectively, industrywide, according to industry statistics as well as the company's analysis.
Investment Management
Investment Management revenue for the first quarter of 2009, which includes transaction fees, captive management fees and dealer- manager fees, totaled $15.5 million, compared with fees of $25.3 million in the same period a year ago. The decrease in revenue over the prior-year period can be attributed to the current market environment, which has significantly slowed investment sales activity. On a year-over-year basis, acquisition and disposition fees generated by the company's investment programs decreased 80 percent.
During the first quarter of 2009, approximately $210 million in equity was raised for the company's investment programs, compared with $264 million in the first quarter of 2008. This decrease was due primarily to lower capital raise for tenant-in-common and wealth management programs which was greatly offset by the large amount of equity flowing into the company's public non-traded REITs. For the months of February, March and April 2009, Grubb & Ellis ranked as the No. 1 sponsor in the public non-traded REIT sector, according to published industry reports. The company's marketshare stood at 13.6 percent at the end of the first quarter of 2009, up from 3.4 percent a year earlier. At March 31, 2009, the value of the company's assets under management was $6.8 billion, essentially flat from year-end.
Rental-Related Operations
Rental-related revenue and rental-related expense includes pass- through revenue and expenses for master lease accommodations related to the company's tenant-in-common programs.
Conference Call & Webcast
The company will host an earnings conference call to review its 2008 fourth quarter and 2009 first quarter results on Thursday, May 28, at 10:30 a.m. Eastern Time. A live webcast will be accessible through the Investor Relations section of the company's Web site at www.grubb-ellis.com. The direct dial-in number for the conference call is 1.800.706.7741 for domestic callers and 1.617.614.3471 for international callers. The conference call ID number is 77473643.
